An investment in knowledge pays the best interest. -- Ben Franklin
The above quote is taken from my “Maxims of Wall Street.” The third edition was just released (see details below).
What’s the best way to survive and prosper when stocks slump? We are now in a full-scale market retreat that began on January 1, 2014. It is not surprising after the massive boom of 2013, when stocks climbed 30% or more.
Steve Forbes said it best, “Everyone is a disciplined, long-term investor… until the market goes down.” Then people panic.
What’s the best strategy -- (1) sell your stocks and go to cash? (2) sell stocks short and actually profit as the market retreats? Or (3) dollar-cost-average in stocks that inevitably will go up?
For most investors, the smart answer is (3) to dollar-cost-average, especially in stocks that pay steady and rising dividends.
I have a whole section of great quotes from seasoned investors and money managers about dividend-paying stocks in “Maxims.” Here are just a few words of wisdom:
“Dividends are the critical factor giving the edge to most winning stocks in the long run.”
-- Jeremy Siegel, The Wizard of Wall Street, author of “Stocks for the Long Run”
The evidence supports this conclusion. According to Ned Davis Research, companies paying a dividend returned 10.1% compared with just 4.1% for non-dividend companies between 1972 and 2006. What's more, during periods when the market declined (like now) between 1970 and 2000, dividend stocks outperformed non-dividend-paying stocks by a 1.5% margin every month!
Lowell Miller, author of “The Single Best Investment” and money manager extraordinaire, insists on investing only in rising-dividend stocks. He states,
“Dividend growth is the true signal of a prospering company.”
Miller’s formula for beating the market is simple but powerful. He calls it “Investing with Peace of Mind.” His formula is:
High Quality + High Yield + Growth of Yield = High Total Return
Doug Casey says it best, “Dividends are an outward sign of inward grace.” I can tell Doug went to a Catholic school.
I like this statement by John D. Rockefeller: “Do you know the only thing that gives me pleasure? It’s seeing my dividends coming in!”